Everyone Else Is Keynesian Now

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The United States is hardly the only country facing tough economic times right now. But a survey of the worldwide response to the recession suggests that American higher education may be uniquely disadvantaged by the way state and federal governments are responding in the U.S., compared to how the rest of the world is dealing with the crisis.

Most governments elsewhere have avoided the “uncoordinated cutting of funding for higher education that we generally see in U.S. state systems,” says a report being released today by the Center for Studies in Higher Education, at the University of California at Berkeley.

In part, the study says that is because the rest of the world -- including many nations facing severe cash shortfalls themselves -- embrace the Keynesian idea of using government investment to push an economic recovery. But John Aubrey Douglass, the author of the report and a senior research fellow at the center, also sees problems in the structure of higher education finance in the United States.

The vast majority of students in the United State attend public colleges and universities, which are depending on state governments for operating support for education (even if the research universities among them receive substantial federal funding for research).

What this means, Douglass writes, is that in the United States, most colleges are dependent on units of government that lack the authority to borrow – and so are severely constrained in their ability to pump more money into the economy (at least barring tax increases that aren’t politically popular). That’s not true in much of the rest of the world, he notes, where federal systems for supporting higher education are more prevalent.

While the report notes the impact of federal stimulus funds in mitigating and minimizing cuts in many states, it stresses that this money is running out -- while states’ fiscal problems are only growing.

Much of the report is a review of cuts made by states (and, in particular, by California) to public higher education. While some of the detail may be new, the overall picture will depress but not surprise American academics.

But the survey of the rest of the world may be more surprising -- given that so many countries are hurting now. The report acknowledges that there are limits on spending elsewhere, but notes that many countries have made it through the first year-plus of the “Great Recession” while protecting higher ed.

Some examples:

China: The growth of Chinese higher education continues apace, even in the worsening world economy. Hundreds of universities have been built in the last decade, the report notes. The report adds that a number of factors -- including this investment in educational infrastructure -- have bolstered the economy such that China is not experiencing the recession. Colleges are not having their budgets cut -- so the expansion of higher ed (even if it still isn’t keeping up with demand) is continuing.

Taiwan: Specific laws protect government funding both for higher education and research, the report notes, minimizing the extent of any cuts. While some funds designated for improving universities have been scaled back, the government remains committed to a plan of enhancements.

Netherlands: While budget cuts may take place in the next year, the country made it through the last year without reductions in spending on higher education. There is strong political support for “protecting the education sector,” the report says. In anticipation of cuts that may be coming, the government has also created special funds to be used by universities for “mitigating budget cuts, enhancing selectively existing university programs, and for attracting talented foreign students.”

France: The government has pushed ahead with reform efforts that have given significantly more control over universities to individual boards, while also providing them with budget increases. The boards are being restructured to include more private sector representatives (along the U.S. model) and additional funds are going to vocational institutes as well.

The report acknowledges that the picture abroad is not universally rosy for higher education. And recent headlines from Britain suggest a degree of anxiety over cuts there similar to what one hears in California and other American states that have been particularly hard hit.

But the underlying conclusion of the report is that the United States and the rest of the world are diverging in ways that will hurt American academe. “The world has embraced this Keynesian moment, when greater government intervention in the economy has proven crucial,” the report says. “In the U.S., the link between highly desired public services, such as education or health care, with government initiative and finance, remains a source of confusion for many Americans.”

In most of the world, the report says, “investment rates in higher education may ebb a bit,” but governments remain committed to “keep growth rates and enhance the higher education sector.” In the United States, in contrast, “the severity of the economic problems, along with the growing gap between the rich and the poor, will likely mean a short-term in decline in access and perhaps a long-term decline in graduation rates.”